A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is The demand curve is In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $ (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit S. (Round your answer to the nearest penny) c. Why does the production subsidy produce a greater gain in welfare than the farift? Q₂ = 50+5P (Round your answer to the nearest penny) Q-400-10P OA. The production subsidy more directly addresses the externality. OB. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OC. The $5.00 production subsidy increases production more than the $5.00 tariff. OD. Both A and B OE. All of the above d. The optimal production subsidy is $
A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is The demand curve is In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $ (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit S. (Round your answer to the nearest penny) c. Why does the production subsidy produce a greater gain in welfare than the farift? Q₂ = 50+5P (Round your answer to the nearest penny) Q-400-10P OA. The production subsidy more directly addresses the externality. OB. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OC. The $5.00 production subsidy increases production more than the $5.00 tariff. OD. Both A and B OE. All of the above d. The optimal production subsidy is $
Chapter19: International Trade
Section: Chapter Questions
Problem 2.6P
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Transcribed Image Text:A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is
The demand curve is
In addition, each unit of production yields a marginal social benefit of 10.
a. The welfare gain from a tariff of $5 per unit levied on imports is $(Round your answer to the nearest penny)
b. The welfare gain from a production subsidy of $5 per unit 5 (Round your answer to the nearest penny)
c. Why does the production subsidy produce a greater gain in welfare than the fariff?
O
OA. The production subsidy more directly addresses the externality.
OB. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare.
OC. The $5.00 production subsidy increases production more than the $5.00 tariff.
OD. Both A and B
E. All of the above
Q₂ = 50+5P
d. The optimal production subsidy is $ (Round your answer to the nearest penny)
Q-400-10P
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